“America lacks a comprehensive energy policy. I have long felt that the moment a policy is set in stone, the sooner the reality on the ground begins to change”

There have been calls for a national energy policy weaving in and out of U.S. geopolitical chatter for decades.

Texas Rep. Pete Olson Calls for a National Energy Policy

Arab oil embargo set U.S. policy makers in motion.

The Arab Oil Embargo lit a fire under that discussion in the 1970s when the U.S. citizenry found itself stuck in long gasoline lines, or passing by gas stations where signs said “Out of Gas.” The fuel wasn’t available. The gas-saving 55 MPH national speed limit was a “policy” that came out of that energy crisis, as did the creation of the U.S. Strategic Petroleum Reserve.

This week, House of Representatives Energy and Power Subcommittee Vice Chairman Pete Olson (R-Texas) wrote a piece in the Houston Chronicle in which he called for a national energy policy. But he didn’t exactly present a detailed, comprehensive energy policy.

Short on details

“America lacks a comprehensive energy policy. I have long felt that the moment a policy is set in stone, the sooner the reality on the ground begins to change. That is why our best bet is to respond to changing market conditions by developing sensible rules that allow the market to work and benefit American interests at the same time.”

Texas Rep. Pete Olson Calls for a National Energy Policy

U.S. Congressman Pete Olson – Texas

Olson opens his argument by pointing out that the U.S. is the No. 1 producer of oil and gas in the world, but that much of the resource is located in the middle of the country and requires pipelines to move it to population centers. He then goes on to talk about bureaucratic red tape slowing down the permitting process.

Put one agency in charge in permitting infrastructure projects

“Permitting a pipeline, much like developing electricity power lines for some markets in the country, has become remarkably and illogically difficult. … In the House, we are developing solutions that put one federal agency in charge to streamline the permitting nightmare when projects cross federal lands or international boundaries, and generally try to make the process faster and fairer. We will never steamroll local communities. But no one is well-served when bickering and bureaucratic backlogs halt progress. … The market should dictate prices. But if the prices are artificially high simply because some Americans live where permitting problem areas exist, that is patently unfair.”

Olson goes on to reminisce about Congress lifting the crude oil export ban last year. “Tankers full of our oil are reaching markets across the globe. This makes it harder for thugs like Vladimir Putin to hold American allies hostage by restricting access to Russian crude.”

He calls for expediting the process for exporting American natural gas to India, Japan and South Korea and Europe, all things that are already in process, with expansion of LNG exports awaiting the buildout of U.S. LNG export projects to match first-to-market player Cheniere Energy (ticker: LNG).

Is an official national energy policy such a good idea?

There are legitimate reasons to be wary of asking the federal government to install a sweeping national energy policy that would favor any industry or sub-group of industries who are in the energy business. You might be stuck with something you don’t like, something that doesn’t work, or something that raises costs for consumers or eliminates entire job categories.

Germany provides a good example.

MIT’s Technology Review ran a story in May entitled “Germany Runs Up Against the Limits of Renewables – Even as Germany adds lots of wind and solar power to the electric grid, the country’s carbon emissions are rising. Will the rest of the world learn from its lesson?”

The gist of the story is that Germany’s all out drive to increase renewable energy sourcing has gotten so large that it’s causing some backfires down the line.

“Germany is giving the rest of the world a lesson in just how much can go wrong when you try to reduce carbon emissions solely by installing lots of wind and solar,” MIT reports.

The author says that the country produces much more electricity than it needs on a regular basis, and there are times when renewables can supply nearly all of the electricity on the grid. But “the variability of those sources forces Germany to keep other power plants running. And in Germany, which is phasing out its nuclear plants, those other plants primarily burn dirty coal,” the report says.

“German law requires renewable energy to be used first on the German grid, [so] when Germany exports excess electricity to its European neighbors it primarily comes from coal plants.”

So now the German government wants to reboot its energy strategy because of many unintended consequences that resulted from its renewable energy first policy.

Germany: sometimes there is so much power in the system that the price for electricity goes negative

“Germany’s carbon emissions in 2014 were 27 percent lower than 1990 levels,” the MIT article said, but “the energy revolution has caused problems of its own. Because fossil-fuel power plants cannot easily ramp down generation in response to excess supply on the grid, on sunny, windy days there is sometimes so much power in the system that the price goes negative—in other words, operators of large plants, most of which run on coal or natural gas, must pay commercial customers to consume electricity. That situation has also arisen recently in Texas and California (see “Texas and California Have Too Much Renewable Energy”) when the generation of solar power has maxed out.”

The article goes on to report that Germany’s Parliament is expected to eliminate the government-set subsidy for renewable energy, a feed-in tariff, that has largely fueled the growth of wind and solar. “Instead of subsidizing any electricity produced by solar or wind power, the government will set up an auction system. Power producers will bid to build renewable energy projects up to a capacity level set by the government, and the resulting prices paid for power from those plants will be set by the market, rather than government fiat.”


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